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Large companies expected to see big increases in HMO insurance costs next year, study says

November 30, 2010 | 3:34
pm

Large companies that offer their employees insurance through health maintenance organizations can expect their costs to rise 9.8% next year, the largest increase in five years, a new study shows.

Rates are rising fast because HMOs tend to provide ample benefits that are attractive to people who use costly medical services, the benefits consultant firm Aon Hewitt says in its analysis. Often such premium increases are shared by companies and their employees.

The study says that many workers who are younger and healthier elect insurance through preferred provider organizations, and contain their premiums by hiking deductibles.

“If HMO rates continue to outpace average healthcare cost increases, employers may elect to take even more aggressive steps in the coming years, such as eliminating HMO plans altogether,” said Jeff Smith, a leader of Aon Hewitt’s HMO rate analysis project, in a statement.

The study examines rate information for 160 companies that range in size from 10,000 to 300,000 employees.

It breaks out HMO cost increases by region: The Southeast is expected to see the biggest hikes next year (12.5%), while the West is expected to have the smallest (9%). The study does not explain the regional differences or break out increases for states.